Money Purchase Annual Allowance

20th Mar 2017

Normally you can contribute up to £40,000 to a personal pension in any one tax year.
For those people who have started drawing income benefits they have triggered the Money Purchase Annual Allowance, which restricts the contributions to £10,000.
The MPAA effectively stops individuals using pension flexibilities around accessing a money purchase pension arrangement as a means to avoid tax on their current earnings, by diverting their salary into their pension scheme, getting tax relief and then effectively withdrawing 25% tax free.
From 6 April 2017 the MPAA falls to a limit of £4,000 per annum.
With employers paying pension contributions for staff it is quite easy to see people unwittingly exceeding this limit.
Should you need any assistance or advice on this matter, please do not hesitate to contact the office.